HG Vora’s ‘Genuine Change’ Push Fuels PENN Entertainment Proxy War

A Shareholder’s Big Call to Action

HG Vora Capital Management dropped a presentation titled “Genuine Change Is Needed At PENN,” urging shareholders to shake up the company’s board at the June 17 annual meeting.

The 100-plus-page deck rips into PENN’s “abysmal performance” and “poor corporate governance,” blaming leadership for torching $11 billion in shareholder value since 2021.

With a proxy fight heating up, HG Vora’s pushing three candidates: William Clifford, Johnny Hartnett, and Carlos Ruisanchez, to restore accountability.

HG Vora’s core gripe is PENN’s pivot from a solid regional casino business to a shaky digital strategy. The firm calls the move an “ill-conceived step” into online sports betting, squandering $4 billion on deals like Score Media ($2.1 billion), Barstool Sports ($550 million), and a $2 billion ESPN Bet partnership with Disney.

These bets flopped, with ESPN Bet scraping just a 2% U.S. market share against a 10% target. PENN’s interactive segment has bled over $1.2 billion in EBITDAR losses since 2021, and HG Vora doubts leadership’s claim of profitability by 2026, noting missed targets from 2021 to 2025.

“Why trust them now?” the firm asks, pointing to a stock drop of 81% since 2021, lagging peers like Boyd Gaming (+73%).

Governance Under Fire

The presentation doesn’t hold back on PENN’s board, accusing it of dodging accountability. Last month, PENN slashed board seats up for election from three to two, just 10 days after HG Vora nominated its trio, a move the firm calls a “brazen act of entrenchment.”

HG Vora’s fighting this in federal court, filing a lawsuit on May 7 to ensure all three candidates, especially ex-PENN CFO William Clifford, can be voted on.

The firm also slams CEO Jay Snowden’s $120 million pay since 2021, calling it “tone-deaf” given PENN’s $11 billion market cap plunge.

“The board’s lost its right to pick directors without shareholders,” HG Vora argues, citing a 2024 Pennsylvania law violation on director elections.

PENN’s Pushback

PENN’s not taking this lying down. In a May 15 letter to shareholders, the company blasted HG Vora’s “self-serving” campaign, claiming the activist’s demands, like a 50% leveraged stock buyback or halting casino projects, would tank long-term value.

PENN says it offered to appoint Hartnett and Ruisanchez on April 24, but HG Vora insisted on all three nominees, including Clifford, whom PENN calls “redundant” due to outdated expertise.

PENN also accuses HG Vora of flouting state gaming rules, citing a 2024 SEC fine and a Massachusetts licensing dodge. “HG Vora’s reckless disregard for regulators puts all shareholders at risk,” PENN warned, noting state authorities barred the firm from seeking governance changes.

The GOLD Card Gambit

HG Vora’s banking on its GOLD proxy card to rally shareholders. The card lets investors vote for Clifford, Hartnett, and Ruisanchez, who bring heavy gaming chops: Clifford drove 20x returns as PENN’s CFO, Hartnett scaled Superbet’s digital growth, and Ruisanchez steered Pinnacle’s finances.

The firm urges shareholders, even those who voted PENN’s white card, to switch to GOLD, arguing it’s the only way to demand “genuine change.”

Some are calling HG Vora’s push a near-win, though others question if regulators will step in. PENN counters that only two seats are up for grabs, making Clifford’s bid a long shot unless the court rules otherwise.

The proxy war’s roots run deep. PENN’s stock, down to $14.20 from $142 in 2021, shows investor frustration with a market cap shriveling to $3.2 billion.

HG Vora’s not alone. Donerail Group pushed for a $7 billion sale in 2024. The firm’s presentation pitches fixes: align exec pay, sell underperforming digital assets, and refocus on PENN’s 43 casinos across 20 states.

But PENN defends its digital pivot as “essential,” claiming momentum despite Q3 2024’s $90.9 million interactive loss. With 75% of the board refreshed since 2019, PENN argues it’s already evolving, though HG Vora calls it too little, too late.